Answer that if they buy copper from Russia,

Answer #1


institute of Management Accountants obligates its members to follow high
ethical standards provided in the IMA’s Statement of Ethical Professional
Practice. Each member of IMA is responsible to comply with the following
standards: Competence, Confidentiality, Integrity and Credibility. The first
standard is competence, that requires IMA’s members to be competent. In
general, competence means to be capable to perform functions at the job. There
are some elements that each member is responsible for. In order to maintain
sustainable level of professionalism, members have to continuously improve
their skills and knowledge. The second important part is the obligation of each
member to comply with the relevant and updated laws and regulations. Another
essential thing is to provide accurate and clear data to the management on
time. Violation of one or more of these parts may result in a loss of IMA
membership. The laws, regulations and standards are constantly changed
nowadays, so it is very important to keep up with knowledge. Let’s suppose that
one of the members stopped to follow updates on tax regulations and after a
while one of the regulations has been changed. Since an employee had no idea
about changes, he kept on doing his job based on the old regulations, and as a
result information provided by him to the management was not accurate. This is
an example of an action that violates all three parts of the competence. The
second standard is the confidentiality. Unlike financial accounting, management
accounting is the process of providing information to internal users such as
managers, to achieve company’s future goals. The management builds strategies
based on this data to reach that objects, and obviously it is important to keep
this information confident from the competitors or other parties who might be
interested in it. Providing this information to third parties is unethical,
unless it is legally required by laws or regulations. Also, members must inform
management about using confidential data. Let’s say that a couple of companies
manufactures cables and they buy copper Mexico. One of these manufactures finds
out that if they buy copper from Russia, the manufacturing costs will drop up
to 10%, they plan to drop the selling price of cable. Company plans to change their
supplier the next year. and occupy another 8% of market share. It is possible
that one of the employees may sell this information to a competitor, which will
take an action to keep that 8% of the market. As a result, the employee
violates standard of confidentiality by using organization’s confidential data
for own benefit. An integrity is another important standard of the statement.
Managerial accountant must decrease and inform about potential conflicts of
interests to business partners. Let’s say we have a choice between two internet
provider companies and one of these companies belongs to partner’s brother. In
this case, a member of IMA must be sure that organization’s selection to work
with the company of partner’s brother is independent action and is not because
family relationship or other illegal benefits. The failure to follow standard
known as a credibility may result in loosing IMA membership. This standard
requires to do job in independent and objective manner and provide all gathered
data to the client. It is important to provide all information that shows that
recommendations are based on objective point of view and does not support only
provided decision or recommendation. Also, IMA’s member must inform employer or
business partner about his professional limitations. For example, management
accountant performs a very good job in decreasing costs of the company and
management decides to give to employee another case. The standard of
creditability will be violated by accountant in the case that, this accountant
knows that he is not able to perform this case but takes responsibility for it.

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Answer #2


to the standards of IMA, members must follow organization’s policy to resolve
conflict. Otherwise, I would discuss disclosure with my direct manager, unless
my manager is involved in a conflict case. As I know that my supervisor takes
part in the conflict or I cannot find ethical resolution, I will inform about
conflict to the next management level by following company company’s hierarchy
structure. If I am still not comfortable with the results, there is another
good option for me is to discuss it with IMA Ethics Counselor. In order to
support members in ethical decision making, IMA provides hotline service to its
members. IMA members can discuss their dilemmas with counseling service. Also,
it important to consult with own attorney to make sure that all obligations are
followed, and I have behaved ethically in this conflict. 



Answer #3


a)      The contribution margin of per unit is equal to 18$
(60$ customer’s willing price minus 42$ variable manufacturing costs per unit).
As a result, total contribution margin will be 72000$ (18$x4000 units). Fixed
manufacturing costs and fixed selling expenses are irrelevant number in
decision making, because in both cases acceptance and rejection these expenses
will occur. In addition, company is able to produce 6000 units more than
current production. If company rejects the special offer, it will lose 72000$
of operating income. So, the order must be accepted.


b)      The contribution margin loss of current sales of 4000
units is 128000$ ((80$ -42$ -6$) x 4000=128000$) and the contribution margin of
special order is 72000$. In this case scenario special order should be rejected,
otherwise operating income will decrease by 56 000$ (128000$ – 72000$)


c)      Special order price has to cover incremental, all addition
costs, that are incurred to complete special order. It is also necessary to identify
how the relation between us and current customers if we sell for product for special
price, which is less than regular one.






Answer #4


a)      Target pricing is marked-based approach to determine a
selling price of a product or service. Market-based approach means that the
price will be fixed by the marked, or in other words by potential customers. This
approach would be most useful in the case if manufacturer or provider comes up
a with fully new product or service. Company can easily identify total maximum
cost of product or service including all variable and fixed costs after
determination of customers’ willing price. Then manufacturer can reduce the
cost of product by implementing value engineering to eliminate non-value-added
costs. Even though the cost of product decreases, the desirable features will
be same.  One of the potential problems
that may occur by using target pricing approach is that it is quite difficult
to reduce costs of the product. Subsequently approach creates communication and
cost reduce conflicts between different departments of the company. Also, price
of a new product or service is very dependent on customers’ ability to pay,
which can be less than actual costs.


b)      In cost-plus pricing approach, manufacturer calculates
cost base and adds mark up to establish selling price. The cost includes the
variable and allocated fixed costs. Mark up is the profit that company is
willing to achieve and usually identified by target rate of return. If the
manufacturer of provider is monopolist in the market or customers accept
offered price, cost-plus pricing will be most useful approach. If there are
competitors in the market, company cannot regulate price without possible
negative consequences. As a result, company will lose its customers, who can
buy same product for less price from another seller.


c)      Life cycle pricing is another type of cost pricing
approach to determine selling price by cost calculation. Unlike in
cost-pricing, in life cycle pricing approach it is important to identify significance
of pre-production and post-production costs in whole life cycle of the product
and allocate them to the product. This approach can help to plan and reduce
future post-production costs and determine whether it is profitable or not by
allocating pre-production costs on unit cost basis.